UPDATE 2-Lower costs, taxes lift Brazil's Vale 4th-qtr net

* Net rises 7.7 pct y/y, but misses analysts' estimates

* EBITDA drops on lower revenue; iron ore segment up

* Production fell in 2009; no 2010 guidance provided

* Company pledges "cost discipline" (Adds details on output, acquisition of Fosfertil stake)

By Guillermo Parra-Bernal

RIO DE JANEIRO, Feb 10 (Reuters) - Vale (VALE5.SA)(VALE.N), the world's largest iron ore producer, said its fourth-quarter net income rose 7.7 percent, below analysts' estimates, after costs fell and the company made use of a tax credit which offset declining sales.

Rio de Janeiro-based Vale posted on Wednesday a profit of 2.63 billion reais ($1.4 billion), compared with 2.44 billion reais in the same period of 2008, according a regulatory filing. Net income fell 12 percent from 3 billion reais in the third quarter of 2009.

A Reuters poll of six analysts expected Vale, whose management has been under pressure from the Brazilian government to invest more inside the country, to post net income of $1.57 billion, or about 2.9 billion reais, for the quarter.

Net revenue tumbled 33 percent as shipments to North America more than halved and a stronger currency slashed the value of exports. The company noted that "bottlenecks in supply" also hurt shipments, unlike the previous two quarters when demand outpaced supply.

Costs fell 11 percent as energy and contractor expenses declined.

Vale said it made use of a tax credit that reduced tax payments by about half in the quarter on a year-on-year basis.

Citing "discipline" to face one of the toughest crises in the mining industry in decades, Vale said "the crisis offered us an opportunity to make structural changes."

Amid resilient demand from China for metals, Vale is slowly increasing output at some plants that were idled at the height of the global economic crisis in late 2008.

Earnings before interest, taxes, depreciation and amortization, an indication of cash flow known as EBITDA, dropped 43 percent to 3.71 billion reais year-on-year, and 38 percent from the third quarter.

The costs of restarting mines as well as increased research and development expenses served to limit gains, while iron-ore related sales helped prop up EBITDA.

In 2009, profit tumbled to 10.25 billion reais, compared with 21.28 billion reais in 2008.

Production of iron ore and pellets fell to 244.6 million tonnes last year from 327.7 million tonnes in 2008.

The company reported earnings data under Brazilian accounting guidelines.

In a separate statement, Vale said it had reached an agreement with Mosaic (MOS.N) to buy 20.3 percent of fertilizer maker Fosfertil's FFTL4.SA capital. Vale could pay up to $1 billion to buy the stake.

It said it would also buy from Mosaic a processing plant in Cubatao, Brazil, for $50 million. ($1=1.85 reais) (Additional reporting by Denise Luna in Rio de Janeiro, Bruno Marfinati and Marcelo Teixeira in Sao Paulo)